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from Breakingviews:

Next BOJ chief should accept monetisation

By Andy Mukherjee

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The Bank of Japan has a morbid fear of directly financing fiscal deficits. But this “no monetisation” creed sits ill with the $1 trillion or so of public debt - roughly a fifth of the Japanese GDP and about 14 percent of the net outstanding public debt - which it has already turned into money. The next BOJ governor, who will take over when the incumbent Masaaki Shirakawa steps down on March 19, should be more realistic.

The BOJ owns about $1.3 trillion in government bonds, which it has paid for by creating money. Of this money, about $375 billion is voluntarily held by banks as excess reserves. If banks suddenly find a more exciting use for these funds, the BOJ will be forced to raise compensation on excess reserves from its present level of 0.1 percent. And if that is not enough, the central bank will have to sell liquid government bonds in the market and extinguish an equivalent amount of money.

But the private sector has no control over the remaining $1 trillion or so of public debt owned by the BOJ. On the central bank’s balance sheet, these assets are backed by three near-permanent liabilities: currency issued by the central bank; zero-interest balances banks are required to keep with the monetary authority, and the BOJ’s capital and loss reserves.

from Breakingviews:

Japan tensions rewrite China shopping lists

By Katrina Hamlin

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

China’s buying habits have taken on an air of the patriotic, at least where Japan is concerned. As tensions rose last year over who owns a group of remote islands, sales of Japanese cars and arrivals of Chinese tourists showed a marked slowdown. Even Chinese acquisitions of Japanese companies fell in the last quarter of 2012.

from Breakingviews:

G7 only adds to global currency confusion

By Edward Hadas
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The G7 has spoken about the troubled foreign exchange markets, and the world is marginally less secure for it. In Tuesday’s four-sentence statement, the finance ministers and central bankers of the world’s leading economies managed to ignore the problem of inadvertent competitive devaluations, contradict themselves and make an empty promise.

from Breakingviews:

Interview questions for the new BOJ chief

By Andy Mukherjee

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Japanese Prime Minister Shinzo Abe’s war on deflation will soon have a new general. A hard-charging Bank of Japan governor with strong conviction and oodles of savvy could help bring Abe’s plan to fruition.

from MacroScope:

A statement of non-intent

The flurry of activity about a G7 currency statement yesterday can now be put in perspective. It will almost certainly happen but it’s very much going through the motions.

We’ve been saying for a while that having urged it to reflate its economy for some time, Japan’s partners could hardly complain now that it is. Lael Brainard of the U.S. Treasury basically let that cat out of the bag last night, warning against competitive devaluations but saying that Washington supported Tokyo’s efforts to reinvigorate growth and end deflation.

from Felix Salmon:

When the finance minister targets stock prices

Japan's economy has been far too stagnant for far too long: everybody can agree on that. The aging population, now used to deflation, prefers saving to spending -- an entirely reasonable stance if prices will be lower tomorrow than they are today. So the government has long been facing a very tough task: to change the psychology of a nation, basically. You can't do that -- as Japan learned the hard way -- with old-fashioned public-works spending. Instead, you have to target expectations.

The Bank of Japan started on this road last month, formally adopting a 2% inflation target. That was the BoJ's way of saying "start spending now, because your yen won't be worth as much tomorrow as they are today". And now the finance minister is doing his part to get the party started as well, in a highly unorthodox manner. In a speech on Saturday, he said that he wants to see the Japanese stock market rise 17% to 13,000 by the end of March.

from MacroScope:

Currency chatter

With the rhetoric getting more heated, the three-year market fixation on bond yields could well be supplanted by currencies in the months ahead.

This week, everything points towards the first meeting this year of G20 finance ministers and central bankers in Moscow on Friday and Saturday. We’ve already got a clear steer from sources that even though France wants the strong euro on the agenda there will be little pressure put on Japan and others whose policies are pushing their currencies lower. Having urged Tokyo to reflate its economy last year, its G20 peers can hardly complain now that it has. That is not to say there won’t be lots of words on the issue though.

from Breakingviews:

Tokyo stocks: this time could really be different

By Robert Cole

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)

Once bitten, twice shy. In fact, investors in Japan have been bitten many times by the seductive notion that the land of the rising sun is emerging from its bear-market night. They would be forgiven for shying away this time.

from Breakingviews:

Equity split from commodities may be short lived

By Ian Campbell
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The often close correlation between equity and commodity prices has faded. World equities are up 15 percent since August while commodities have barely moved. Is this a paradigm shift? Probably not, though shale gas is rattling energy markets. Equities may simply have run too fast on the back of quantitative easing while commodity investors have hesitated over global growth worries.

from Breakingviews:

Weak yen makes Japanese electronics firms giddy

By Peter Thal Larsen

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

Japan's assault on the yen has produced some clear winners: investors in the country's beaten-up consumer electronics industry. Shares in Panasonic jumped 17 percent on Feb. 4 after the group reported a less-severe-than-expected quarterly loss. The hope is that stronger exports and recent cost-cutting will transform earnings. But with revenue still shrinking, the recent rally is largely based on hope.

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